More and more Australians are using the internet to research their housing options, and this is having a major impact on the property market. If you’re in the market for a new home, you’re probably using online portals to help you find listings in your desired area. But have you ever wondered how popular your searches are?
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Buy and Rent Search Index (Buy SI & Rent SI)
The HtAG search index metric aggregates online search data for property listings in Australia. It benchmarks number of searches in a particular suburb against state or area average (adjusted by population size) and assigns an index value that indicates demand in the market.
This is a useful tool for buyers who are trying to get an idea of where the market is heading. It can also help sellers gauge the likely level of interest in their property. The index is designed to have a value between 1 and 10, which is intuitive and easily measured.
A high search index indicates that there is significant interest in a particular market, and this can be a good indicator of growing demand. However, as with other demand and supply metrics it’s also important to consider the index trend.
Demand for Real Estate and Buy Search Index
Because of the dynamic nature of property markets, demand can shift from one market to another or dissipate over time as more established dwellings are built.
The HtAG Buy & Rent SI is designed to not only indicate market demand but also serve as a relative measure that benchmarks a property market relative to neighbouring markets.
For example the number of searches in 2 suburbs can be decreasing along with the wider capital city market. However, searches in 1 suburb may be decreasing at a rate above that of the overall market. The SI chart will reflect that as an decreasing Buy Search Index – blue bars on the chart above.
Demand in the Rental Market: Rent SI
Similar to searches for properties listed to buy, many online portals also collect data on rental listings. The Rent SI metric establishes the online search interest for rental properties in a particular market.
The number of online searches for rental listings in Australia has increased steadily in recent years. On the macro scale this increase is likely to continue as more Australians turn to renting as a housing option.
However as can be seen from the chart above, the Rent Search Index for the CBD suburb of Melbourne as well as many other inner city markets has been on the decline.
Overlaying Buy and Rent SI
The overall trend for Buy and Rent Searches is generally highly correlated. However, when we overlay the Buy and Rent SI for Melbourne, there is less demand in the rental market relative to the housing market.
In general, the rental market is more affordable than the housing market and there is more availability of rental properties than there are houses listed for sale. This is especially true in larger cities like Sydney and Melbourne.
You will notice that a lot of inner city suburbs have lower Rent SI scores relative to Buy SI.
Conclusion
If you’re looking to buy an investment property in Australia, it’s important to be aware of the current demand in the market. Using online Buy and Rent Search Indexes can be a good way to gauge demand in the market. It can help you decide whether to move quickly on a property listing or continue searching for something better suited to your needs.
Buy and Rent SI with an index value of 5 are usually indicative of balanced property markets. Values above 5 highlight markets with higher demand, whereas values below 5 normally indicate subdued demand or markets with lesser sales or rental activity.
As always, it’s important to NOT rely on Buy & Rent Search Indexes in isolation. Always benchmark them against other supply and demand indicators.
Great post, Terry!
I wanted to add that online searches for property listings can be somewhat unreliable due to several reasons and should be approached with care.
The data can be skewed by repeat online searches and other unpredictable user behaviour, as well as automated visits by bots and search engines. That’s why we place lesser significance on Buy and Rent SI in comparison to other demand metrics such as DoM for housing market and Vacancy Rates for rental markets.
This metric indicates demand better in regions with higher sales and rental activity. Care should be taken in slower paced markets such as regional or fringe suburban areas.
The Buy and Rent SI tool is designed to pinpoint suburbs experiencing burgeoning interest. A clear uptick in an area’s Buy or Rent SI could suggest a market on the rise, opening an opportunity for savvy investors to capitalise on the suburb before it hits its peak.
Monitoring Changing Demographics
Notably, the Buy and Rent SI can also provide indirect insights into changing population demographics. If an area historically marked with a high Buy SI starts showing a rise in the Rent SI, it might indicate a younger or potentially transient population moving into the area. Understanding these demographic shifts can be crucial when choosing where to buy or invest.
Time-Based Market Analysis
The dynamism of the Buy and Rent SI allows investors to strategically time the purchase or sale of their properties. The SI trends can potentially forecast market booms and downturns, thereby providing investors with crucial guidance on when to enter or exit the market for maximised returns.
Investing in Uni-Cities
For investors considering properties in university-dominated areas, the Rent SI can offer more relevant insights than the Buy SI. A steady or increasing Rent SI in these regions indicates a consistent student population, providing strong renter demand and consistent rental returns.
Adjusting Rental Pricing
Besides assisting with the decision of where to purchase, property investors can use Rent SI trends to determine suitable pricing for their properties. A rising Rent SI could warrant a rent increase, while a falling Rent SI might require lowering rent to attract tenants.
Leveraging Property Sales
On the home selling front, a rising Buy SI in your suburb could signal a seller’s market, indicating that it’s a good time to capitalise on high buyer demand and potentially gain favourable sale prices.
Summary
In summary, the Buy and Rent SI offers a wealth of advantages to Australian real estate investors. It not only helps to identify high demand areas and demographic shifts but can also guide strategic purchasing and selling decisions.
Remember, while these indexes offer valuable insights, they should be used in conjunction with other market investigation tools for making comprehensive and informed investment decisions.